Canadian National Railway (USA) (NYSE:CNI) — I first recommended CNI stock as the Trade of the Day on Oct. 6. At the time, shares were trading just above $70, which is where they are now. But since then, the company has sustained lower grain prices, a 40% drop in crude oil and a 10%-plus fall in the Canadian dollar versus the U.S. dollar.
Despite these headwinds, S&P Capital IQ has maintained its “buy” rating on CNI stock. Its analysts also increased their 2015 earnings estimate by $0.30 to $4.30 per share during that time, and initiated 2016 estimates at $4.73.
They forecast revenue growth of 10% in 2015 due to increased grain shipments and frac sand. The railway could also see oil-related volumes increase with the infrastructure build-out in Alberta. If this happens, CNI stock could benefit from an increase in crude oil prices and a better exchange rate for the Canadian dollar.
Capital IQ upped its 12-month price target on CNI stock to $90 from $84. Its analysts noted management’s ability to maintain an industry-leading operating ratio, its adjustment to market conditions and less exposure to coal compared to other railways.
CNI stock successfully tested its 50-day moving average at $66, reversing from a right triangle bullish support line and jumping through its 200-day and 50-day moving averages. The reversal also confirmed that the long-standing bull market in CNI stock is intact, and that shares should break through resistance at $74.
My six-month trading target for CNI stock is $82, which is 17% above current prices. Investors could benefit from holding this well-managed rail company for a much bigger profit, including dividends. The company recently announced it will increase its dividend by 25% to $1.25 per share annually, which offers a current forward yield of 1.8%.
